Nicholas Winterton: The Northern Executive, fully supported by the majority of the people of Northern Ireland, not least the Unionist population, have achieved huge success, with major concessions to the nationalist population. Will the Secretary of State confirm to the House that there is now absolutely no need whatever for any paramilitary activity, unless it is by a hard core of people who want to destroy the peace, stability and economic success of Northern Ireland?

Owen Paterson: The Treasury Select Committee, with a Labour majority, said it was
	"unacceptable and farcical that both the UK Government and the Northern Ireland Executive...have failed to act."
	In Northern Ireland questions last June, the Secretary of State promised me further talks,
	"not with empty slogans and hollow promises but with real action-and not by doing nothing."-[ Official Report, 3 June 2009; Vol. 493, c. 261.]
	But here we are, nine months later, and nothing has happened. We cannot go on like this. Is it not time for change and for him to make way for a Secretary of State who will stick up for the people of Northern Ireland?  [ Interruption. ]

Alistair Darling: This Budget takes place as the UK is emerging from the deepest global recession for over 60 years. It has been a testing time, which has required Governments across the world to make difficult decisions and difficult choices, and to take unprecedented actions. We had to decide whether to intervene to rescue the financial system or to stand on the sidelines, and whether we should support the economy, business and families, or let the recession take its course. The record shows that the right calls were made.
	Global recession has not turned into depression. Unemployment here in the UK has not risen as much as was feared. Borrowing, as I will explain later, is lower than forecast last year. But the recovery is still in its infancy, and there are equally tough choices ahead: choices that will shape our economy and society for decades to come. The task now is to bring down borrowing in a way that does not damage the recovery, or front-line services on which people depend. The challenge now is how we invest as a country to support the industries of the future and allow the talent of the British people to flourish.
	At the heart of our decisions is a belief that Government should not stand aside, but should help people and business to achieve their ambitions. My Budget today builds on that belief, and on our confidence in this country. This will be a Budget to secure the recovery, to tackle borrowing, and to invest in our industrial future. It will continue targeted support for businesses and families where and when it is needed. It will set out how we will stick to our plan to halve the deficit within four years.
	Our economy is at a crossroads. Having come through this global recession, this Budget will set out a route for the country to long-term prosperity. At its heart is a £2.5 billion one-off growth package to help small businesses, promote innovation, and invest in national infrastructure and key skills. This package will be paid for by switching spending from within existing allocations and the extra proceeds from the tax on bank bonuses, in line with a Budget that is balanced over the period.
	The world is still recovering from the severest economic shock of our lifetime. Despite what some try to suggest, the recession has not been restricted to the UK, nor did it begin here. A storm which began in America spread rapidly around the world. It was the biggest test that countries had faced in modern times. When I presented my Budget a year ago, world leaders had just met in London to agree unprecedented action to rescue the global economy. Governments of all political colours acted to stabilise their banking systems and to use fiscal and monetary policy to boost demand and protect jobs.
	Not everyone here supported the action taken, but with hindsight it is even clearer that the right calls were made: economic disaster was averted; growth has begun to return across the major world economies; and the prospects for the global economy are much more positive than they were a year ago. But there is nothing preordained about continued recovery. There are still uncertainties. Financial markets are febrile, oil prices have increased by over 50 per cent., bank credit, while improved, remains weak in many parts of the world, and confidence has not fully returned to either businesses or consumers.
	That is particularly the case in Europe, which is the market for 60 per cent. of our exports. Germany saw no growth in the last quarter. Ireland, another key trading partner, has contracted by over 10 per cent. Spain is still in recession. Italy has slid back into negative growth. Unemployment at 10 per cent. across the euro area is adding to uncertainty. All these factors are having an impact, particularly on an open trading economy like the UK. So it is imperative that EU countries act with renewed energy and vigour to get the European economy moving forward again. We need to support trade, discourage protectionism and take forward structural reforms. Such continued international action is crucial not only to global prospects but to each and every country's future. Over the last two years we have been reminded of the force for good that Governments can be in protecting people. The role of government is now equally critical in regulating the global financial system and putting in the right foundations for future growth, jobs and prosperity.
	The crisis in the world economy started in the banking sector, so improved global financial regulation must be the key priority. Our first test here in the UK came with the problems of Northern Rock. The Government intervened to protect savers and underpin the financial system. The unprecedented decision to nationalise a high-street bank was controversial, as was our action later that year to recapitalise the banking system. Other Governments right across the globe also acted to stabilise the financial system, and I believe this judgment has been proved correct. In the UK, the latest figures from Northern Rock show it is returning steadily to normality. RBS is now being restructured and is rebuilding. Last week Lloyds predicted a return to profitability this year. We will sell our shares in RBS and Lloyds, as well as Northern Rock, in a way that maximises value for the taxpayer and recoups the money we have invested.
	We intend to get all taxpayers' money back. In the meantime, I can tell the House that the Treasury has already received over £8 billion in fees and charges from the banks, in return for our support. At the time of the pre-Budget report I put in place a one-off 50 per cent. tax on the excessive bonuses of bankers. I made it clear that banks had a choice of whether to pay bonuses or not-but that if they did, given the amount of taxpayer support that had been provided, I believed it was right that the country as a whole should benefit. I can tell the House that that tax has raised £2 billion-more than twice as much as was forecast. That is money paid by the banks, and those receiving bonuses will, of course, also have to pay income tax at the highest rate.
	As well as supporting the banking system during the crisis, we need long-term reform to prevent excessive risk-taking. Under our presidency of the G20 last year, we put in place a plan to reform the international regulatory system, but we still need to do more to strengthen global banking. The G20 countries must put in place new rules on capital and liquidity by the end of the year. We also need to reform remuneration practices, improve cross-border resolution for when banks fail, and ensure that international standards are implemented. We cannot continue with a situation where the banks are rewarded for creating excessive risk, but the taxpayer foots the bill when things go badly.
	More countries now agree on the need for an international systemic tax on banks, which must be brought forward quickly, as I will urge international Finance Ministers in Washington when they meet next month. I agree with all those who think that such a tax should be internationally co-ordinated. Going it alone, as some have suggested, would costs thousands of jobs, not just in London but across the whole country. Global efforts must be complemented in each country with a drive to implement existing banking reforms, as we are doing in the UK.
	As part of the reform of banking, I want to make it easier for everyone to access banking services. Since 2003, the number of people without a bank account has been halved. I can today announce that we will do more to combat financial exclusion, through a guarantee that everyone can have a basic bank account. That will mean that over the next five years up to 1 million more people will have access to bank accounts-something essential in the modern world.
	We must be careful that, as banks begin to return to profit, the sense of urgency around reform is not diminished. There can be no return to business as usual for the banks, but we also must remember that their success is vital not just for the global economy but for Britain's future. London is the world's leading financial centre. Across the country, the sector supports over 1 million jobs, including in Edinburgh, Leeds, Manchester, Cardiff and other cities. A healthy, strong financial services industry is essential for our long-term prosperity.
	The crisis might have started in the financial sector, but it spread rapidly to the entire global economy, underlining why intervention was essential. The impact has meant that the UK economy has contracted by around 6 per cent. over the course of the recession. That compares with 8 per cent. in Japan, 7 per cent. in Germany and 4 per cent. in the United States. Businesses in the UK have taken painful decisions. Many families have seen their incomes squeezed. Given the intensity of the global storm, no Government could prevent all jobs from being lost, or all businesses from closing.
	However, I believe that Governments have the ability to act and the responsibility to reduce the length and severity of the recession, which is why we took decisive action to stimulate the economy, cutting taxes for families and business, as well as bringing forward capital spending. We also introduced initiatives such as the car scrappage scheme to protect jobs and skills. I can tell the House that this helped to drive an increase in sales of nearly 30 per cent. in the past year, and this in the middle of a recession.
	Of course those decisions have a cost, but the cost would have been far greater, for families and the economy, if we had failed to act. We could have followed previous Governments and watched from the sidelines; we could have listened to those who opposed all those measures last year. But if we had, I believe that we would still be in recession. I am also certain that the pain caused would have been worse and more widely felt.
	Indeed, in the recession of the 1990s the rate of home repossessions was twice as high as now. That would have been the cost of abandoning families to their fate. Double the rate of business failures: that would have been the cost of failing to support business through this recession. And because of the policy decisions that we made, the Bank of England has been able to take decisive monetary policy action during the downturn. Interest rates have been held at record lows-below 1 per cent.-although they were at double figures for almost three years in the early 1990s. But more than anywhere else, we can see the impact of our choices in the state of the jobs market here. Unemployment has been rising in this country, as it has been around the world. Last week's figures, however, showed that UK unemployment had fallen, and is lower than unemployment in the euro area and unemployment in the United States. Even after the severity of this recession, the claimant count stands today at 1.6 million people. This compares with 3 million people in the recessions of the early 1980s and 1990s. Nor, because of a decade of welfare reform, has there been the massive increase in the numbers on inactivity benefits that we saw in the 1980s and 1990s.
	I can tell the House that the claimant count today is still lower than the number we inherited in 1997. That has not happened by chance; it has happened because of the choices that we made. It is because of the tremendous efforts by business and work forces to keep people in jobs. It is also because, as the global storm hit our country, we responded with an additional £5 billion to help people find new work more quickly. We expanded the Jobcentre Plus network and offered support through the rapid response service at firms hit by redundancies.
	It is clear that our approach is making a difference. Nearly 4 million people have been helped off the claimant count in the last year alone. With personalised support, around three quarters of those losing a job are leaving the claimant count within six months. Indeed, if this recession had followed the course of the last one, four times as many jobs would have disappeared.
	The flexibility of the tax credits system has also provided automatic support, compensating families for loss of income due to shorter working hours and part-time working. I can tell the House that this year 440,000 families have benefited from this extra help-on average by £38 more per week-when they need it most. Despite all this support, there are groups that are likely to need more help, even as the economy recovers. For older workers, I want to extend the support provided by tax credits. To make it easier for those over 60 to receive working tax credit, we will reduce the minimum number of hours they need to work to be eligible. To enable people who want to work longer to do so, we are now consulting on reform of employers' right to make people retire at 65. We are looking at options that include scrapping the default retirement age, raising it or giving employees stronger rights.
	For younger workers, I have introduced a guarantee of a job or training for every 18 to 24-year-old after six months out of work, which is already proving a success. This was to run until March next year, but with recovery still in its infancy, we should not withdraw this support too soon. Because unemployment has been lower than forecast, the cost has been lower than expected. I have therefore decided to use the money saved to extend the guaranteed offer to young people until March 2012. So for the next two years I can guarantee that no one under 24 will need to be unemployed for longer than six months before being offered work or training: help with jobs now and, as I will outline later, help with jobs for the future.
	Low mortgage rates have reduced costs for home owners, but many families still face fears over repossession. The support for mortgage interest scheme, which I enhanced during the recession, is already helping 220,000 homeowners who lost their jobs. To maintain this help during the recovery, I will continue to pay this support at the higher rate for another six months.
	I am also determined to do more to help families take that first crucial step on the housing ladder. We have introduced new help through shared equity schemes, and in 2008 we also brought in a stamp duty holiday on all transactions under £175,000, which ended in December. By helping 260,000 home buyers, it supported the entire housing market when it needed it most. The housing market is now stabilised and has begun a slow recovery, but many first-time buyers, particularly those without large deposits, still find it hard to get a mortgage. I want to help them, but to do so in a way that is properly funded.
	I can announce that I will double the stamp duty limit for first-time buyers from midnight tonight from £125,000 to £250,000 for this year and next. This means that nine in 10 first-time buyers will pay no stamp duty at all. But to ensure this measure does not become a burden on public finances, this relief will be funded through an increase in the stamp duty to 5 per cent. for residential property over £1 million from April next year.
	Tax-free individual savings accounts have been an extraordinarily popular way to save, including for those saving for a deposit on their first home. Since their introduction in 1999, 19 million people have taken them out, saving over £270 billion. From next month, the annual ISA limit will rise from £7,200 to £10,200, of which half can be saved in cash. To help encourage saving further, I have decided that ISA limits will increase annually in line with inflation. These changes come at a time when the savings ratio has already risen strongly over the past year, to the highest it has been since 1998.
	The last year has been tough for many people, but the evidence shows it would have been harder still without the choices we made and the action we took to support the economy. We need the same good judgement and decisive action to secure and strengthen the recovery, and to provide the right basis for the country to seize the opportunities ahead.
	I want now to return to my forecasts. As I have said on many occasions, the world economy is still in a period of great uncertainty. In the absence of Government action to support the economy, the weakness in some of our overseas markets, particularly Europe, could result in a substantial downward revision of our growth prospects, but because of the action we have taken through the recession, and the measures that I am announcing today, I believe that only a small reduction is needed.
	This year, as I said in last year's Budget speech and last year's pre-Budget report, I expect the economy to grow by between 1 and 11/2 per cent. I have decided to revise slightly downwards my forecast for 2011 to bring it into line with those of the Bank of England, to growth of between 3 and 31/2 per cent. Projections for the public finances are based, as is normal, on the lower end of these forecast ranges. As the economy continues to rebalance following the recession, my forecast for the following years is unchanged.
	We have already seen inflation rise above 3 per cent. in the first month of this year, increasing the cost of living. The inflation figures released yesterday show a rise of 3 per cent. Although high compared to recent years, this is a far lower sum than the peaks in inflation of over 10 per cent. in the 1990s and 20 per cent. in the 1980s, and as the Governor of the Bank of England has said, the present increase in inflation should be temporary, and results from the ending of the VAT cut and other one-off factors.
	I want, however, to help families and business through this period, so I have decided to stage next month's increase in fuel duties. Instead of the planned increase, fuel duty will rise by a penny in April, which is less than inflation, and it will be followed by a further one penny rise in October, and the remainder in January. The staging will ease the pressure on businesses and family incomes at a time when other prices are increasing. By the time the full rise comes in at the beginning of next year, I am forecasting that inflation will be back at 2 per cent. I am today writing to the Governor of the Bank of England in the usual way to confirm that the inflation target remains unchanged at 2 per cent. With interest rates also expected to remain low and stable, this is essential for future growth.
	The cost of stabilising the financial system and stimulating economies has meant an inevitable increase in Government borrowing here and around the world. This has been exacerbated by the sharp fall in tax revenues during the recession. The importance of our financial industry, which provided £1 in every £4 of corporation tax, has meant that we have been particularly badly hit. In the pre-Budget report I forecast that public sector net borrowing would reach £178 billion this year.
	We now have hard data rather than forecasts on tax revenues for 11 months of this financial year, and as a direct result of the action we took in supporting the economy at a difficult time, tax receipts in December, January and February have been better than expected. More resilient consumers and retailers have meant that VAT receipts are now £3 billion higher, better company profits have led to higher corporation tax receipts, and with more people having stayed in work, income tax revenues are stronger.
	These are the results of the deliberate choices we made over the last two years. At the same time, spending-including spending on benefits and tax credits-has been broadly in line with my forecast. As a result, I can tell the House that borrowing this year should now be £11 billion lower, at £167 billion. In 2010-11, in part because of one-off factors boosting receipts-such as this year's tax on bank bonuses-borrowing will be £163 billion.
	It would not be sensible to assume that this year's surplus in receipts will be maintained in full in the medium term, but with the economy recovering in later years, together with the revenue from tax increases already announced, borrowing will fall to £131 billion in 2011-12, then to £110 billion; in 2013-14 it will be £89 billion; and it will reach £74 billion in 2014-15-£8 billion lower than was forecast in December. This will mean that debt is £100 billion lower by 2013-14 than was expected at the time of last year's Budget.
	As a share of the economy, borrowing is forecast at 11.8 per cent. of gross domestic product this year. It will fall to 11.1 per cent. next year, then 8.5 per cent. In 2012-13 it will be 6.8 per cent., then 5.2 per cent., and fall to 4 per cent. in 2014-15. This means a reduction in the deficit from 11.8 per cent. to 5.2 per cent. It will have more than halved over a four-year period.
	The structural deficit, which takes into account the economic cycle, is estimated to be 8.4 per cent. of GDP this year and to fall to 2.5 per cent. by the end of the period. That is a reduction in the structural deficit of over two thirds, removing the bulk of the structural deficit by the end of the next Parliament. And as I have said before, should the economy perform better than expected, we will be able to do more to reduce the deficit.
	In 2007 Government debt as a share of the economy was lower in the UK than in every other G7 country except Canada. Debt has increased across the world as a result of this global recession. According to the International Monetary Fund, net debt as a share of GDP is expected to reach 82 per cent. in Germany, 83 per cent. in France and 85 per cent. in America. As a result of our action to support the economy, I can forecast that public sector net debt here will reach 54 per cent. of GDP this year. It will then increase to 75 per cent. by the end of the forecast period in 2014-15, but net debt as a share of GDP will begin to fall the year after that. Even at its peak, debt will be in line with the average of the G7 economies. This is the fastest deficit reduction plan of any G7 country and we will meet our statutory obligations. To start cutting now risks derailing the recovery, which is already bringing down borrowing more rapidly than expected. To go faster, in the face of uncertainty, would mean taking a huge risk with people's jobs and incomes, and with our country's future. I am not prepared to take that risk. We have worked too hard as a country to come through this recession to throw it away now.
	I know there are some demanding immediate cuts to public spending. I believe that such a policy would be both wrong and dangerous.
	We will need to work as hard to establish a platform for sustained growth, jobs and prosperity in the long term. Since the start of the global crisis, I have always been clear that support for the economy now must go hand in hand with a clear plan to reduce borrowing. Our plan is to reduce borrowing by £78 billion in cash terms over the next four years. We are set to achieve that goal by a combination of three elements: tax; public spending cuts; and, of course, growth in the economy.
	First, on taxes, I have already made difficult decisions, and I have been guided by our values of fairness and the need not to undermine the recovery. The one penny increase in the main rate of national insurance contributions will not affect anyone earning under £20,000 a year; nor will it come into effect until April next year, by which time I expect that the recovery will be stronger and more secure. The 50 per cent. rate of income tax will come in next month, but it affects only those with earnings over £150,000 a year-the top 1 per cent. of earners. For people with incomes over £100,000 a year-the top 2 per cent.-we will gradually remove the value of their personal allowances. Tax relief on pensions will be restricted from next year, but again only for those with incomes above £130,000 a year.
	Among all the tax rises since the beginning of this global crisis, 60 per cent. of them will be paid for by the top 5 per cent. of earners. We have not raised these taxes out of dogma or ideology; we are determined to ensure that our overall tax regime remains competitive. But I believe that those who have benefited the most from the strong growth in incomes in the past years should now pay their fair share of tax. I have no further announcements on VAT, on income tax or on national insurance rates.
	I can confirm that duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also be increased by 2 per cent. above inflation for two further years from 2013, and the planned increase in fuel duty and landfill tax will continue for one year from 2014.
	A long-standing anomaly has meant that cider has been under-taxed in comparison with other alcoholic drinks. I intend to correct that, so duty on cider will be increased by 10 per cent. above inflation from midnight on Sunday, and in September changes will be made to the definition of "cider" to ensure that specific strong ciders are taxed more appropriately.
	Tobacco duty will increase from today by 1 per cent. above inflation and then increase by 2 per cent. in real terms each year until 2014. I have also decided to freeze the inheritance tax threshold for a further four years, and this will help to meet the cost of care for older people. My right hon. Friend the Secretary of State for Health will shortly set out further proposals. Altogether, our tax plans will raise £19 billion towards reducing borrowing.
	The next element of our fiscal plan is to control public spending. But to cut spending now, before the recovery is self-sustaining, would be short-sighted and counter-productive. That is not just my view, but that of Governments around the world, the International Monetary Fund, the World Bank and the OECD. I know that others take an opposite view. Indeed, the House will remember that in his Budget response last year the Leader of the Opposition even then demanded immediate action to cut spending. If we had listened to him, the result would have been to deepen the recession and delay the recovery, and to see more businesses closing and many more jobs lost. As a result, borrowing would have been higher, not lower. We did not follow that course; nor did any other G20 country. Cutting support now would take demand out of the economy, pull the rug from under the recovery and delay our return to sustained growth.
	So we will stick to our spending plans for next year, which will see a 2.2 per cent. real-terms increase. That will allow more time for the private sector to invest and create jobs, ensuring that the recovery will continue and strengthen. It will also mean that we can maintain the improvements that we have put in place for our front-line services over the past 13 years-improvements that have seen 118 new hospitals, 1,600 new schools, and tens of thousands of extra doctors, nurses, police and teachers.
	In December, I set out how we will protect spending on those front-line public services, on which we depend. That enabled us to guarantee NHS health checks every five years for the over-40s; referral to a cancer specialist within two weeks; extra maths and English tuition for all seven to 11-year-olds who fall behind; a place in education or training for every 16 and 17-year-old; and to maintain funding for police officer numbers. I can confirm that we will honour those guarantees.
	I can also confirm that we will allocate over £4 billion from next year's reserve to fund operations in Afghanistan. I know that the whole House will want to join me again in paying tribute to the courage, commitment and professionalism of our armed forces, who represent all that is best in our country.
	We can offer these guarantees for front-line services-and deliver our plan to reduce the deficit-only through continued reform and efficiencies, and through holding down increases in spending overall. If unemployment is lower than predicted, as has already been the case, the cost of paying benefits will be lower. Debt interest costs have also been lower than expected. Even so, it is clear that the next spending settlement from 2011 onwards will be very tough-it will be the toughest for decades. Even before the spending review has been held, we have already identified cuts and efficiencies of over £20 billion, through limiting pay, reducing programmes and making savings. In December, I set out savings of £4.4 billion in public sector pay and pensions by 2012-13. There will be reductions in the pay bill for senior civil servants. Overall, we intend that public pay settlements will be held at a maximum of 1 per cent. for the two years from 2011. We will also implement reforms to ensure that public pensions are affordable.
	Secondly, we need to identify savings across every part of the public sector by delivering services more efficiently; they will be tough and challenging, but they are achievable. We have already saved £26.5 billion from departmental budgets between 2005 and 2008, but we need to go further. At the pre-Budget report we committed Government Departments to find over £11 billion of new savings through reforms, without damaging the front-line services. Departments will publish today details of how they will make these savings from 2011, as we work towards the spending review. We will also find savings by relocating civil servants from expensive London offices to elsewhere in the country. In the long term, I am announcing that the number of civil servants in London will be reduced by a third. As a first step, 15,000 posts will be relocated within the next five years. I can tell the House today that 1,000 posts from the Ministry of Justice will be moved out of central London, saving £41 million.
	Thirdly, on top of those savings, we have already identified £5 billion of cuts in specific programmes, which were announced in December. I can confirm that they will go ahead as planned. Fourthly, it has always been our goal to reform the benefits system so that it makes work pay. The current approach to calculating housing benefit pays very high rates to a small number of tenants in expensive areas. That discourages employment and is unfair. I can tell the House that we are taking steps to address that, so from October next year the most expensive properties across the country will be excluded from the housing benefit calculation in each area. In addition to measures to prevent fraud and error, that will save nearly £250 million a year by the end of the forecast period.
	That is over £11 billion from greater efficiencies, £5 billion from scaling back or cutting lower priorities, and over £4 billion from reducing the cost of public sector pay and pensions. In total, that is £20 billion-worth of savings to reduce borrowing and protect front-line services-even before the spending review.
	There is one other area that can help to reduce Government debt. I announced at last year's Budget a programme to secure £16 billion through asset sales, and we are making considerable progress. On the student loan book, we are looking to appoint advisers in the next couple of months to develop a sales proposal. On the Tote, we are on track to launch the sale process this summer. We are also finalising options on the sale of the Dartford crossing. The proceeds from these sales will make a significant contribution to reducing debt.
	The third element of our plan to reduce borrowing is economic growth. As we have already seen in the enhanced tax receipts since December, a stronger economy can make a major contribution to reducing borrowing. The raw materials to fuel growth are here in abundance. No country has more talent, and we remain the world's sixth biggest manufacturing nation. We have world-class industries, advanced manufacturing, bioscience, aerospace and the creative sector, whose products are in demand across the globe. We have worked hard to create the environment where that ingenuity and entrepreneurial flair can thrive, doubling investment in our science base, and having low interest rates and inflation and the lowest rate of corporation tax in the G7.
	However, our competitors are not standing still. The opportunities and jobs of the future will come from the new markets and new locations, particularly in the east. We cannot take growth for granted. Again we have a choice: we can sit back and hope for the best or we can recognise the role that Government can play in providing a launch pad for businesses to succeed. Of course, it is the private sector, with its drive and ingenuity, that will create jobs and prosperity, but just as the Government have been critical in reducing the severity of the recession, it is the Government who have a crucial role in building our country's strengths. Together with the Secretary of State for Business Innovation and Skills, I have been working to find effective ways to enable small businesses to grow, to invest in key national infrastructure and skills, and to promote research, innovation and enterprise.
	Access to finance is vital for small businesses. It was understandable that banks reduced lending to repair their balance sheets, but it caused problems for companies and the wider economy. In return for support during the financial crisis, we have made banks accept their obligations to lend more. In the past 12 months, RBS and Lloyds, which make up half the market, have lent £38 billion to small and medium-sized businesses. However, as recovery gets under way, we need to ensure that viable small and medium-sized enterprises continue to get the credit that they need. So, over the next year, I have agreed that RBS and Lloyds will provide a total of £94 billion of new business loans, with nearly half going to SMEs.
	There are still companies that are unfairly denied credit and that feel powerless to challenge such decisions. I want to change that position and to give them the right to have their credit complaints properly examined. To help them and the economy, I will set up a new service to fast-track credit complaints from SMEs. This new credit adjudication service will examine lending decisions to see whether they are fair. It will have legal powers to enforce its judgments if it believes that credit has been wrongly denied. But, ultimately, the best way to open up credit for business is to boost competition. We have already made sure that the restructuring of Lloyds and RBS, which will see 900 branches change hands, will bring new entrants into the market. At least five new banks have already either established themselves as business lenders or are in the final stages of setting up. We want even more competition, so the Financial Services Authority will improve and speed up the licensing processes for new banks.
	We want successful businesses to be able to attract equity and venture capital, as well as bank loans. The Government already offer a wide range of support for businesses to help to unlock additional private investment, but businesses find that the wide variety of options can be daunting, so we are bringing together all those initiatives under a new national investment corporation to be called UK Finance for Growth, which will streamline and improve our offer to the SME sector. The new body will oversee the Government's £4 billion range of finance support for businesses. That will also include a new growth capital fund, which will have a specific role in providing fast-growing companies with the private capital that they need. Commercial banks have so far agreed to contribute more than half of the £200 million committed to that fund. It will eventually provide £500 million of finance.
	In addition, in this Budget, I am taking forward a range of proposals to help larger firms to access non-bank sources of lending. Small businesses throughout the country count central Government as one of their key clients. Building on the recommendations of the Glover review, I will increase by 15 per cent. the proportion of central Government contracts that go to small and medium-sized firms. That could mean new business worth an extra £3 billion from central Government alone and up to £15 billion across the wider public sector. In addition, we are taking steps to speed up payments to businesses from Government Departments, so that 80 per cent. of invoices will be paid within five days.
	I will also provide extra support to small businesses through the tax system. The improved time to pay scheme has helped businesses to spread £5 billion-worth of tax payments over a timetable that they can afford. Between them, those businesses employ more than 1.4 million people. The extra time has also helped businesses to pay more of the tax that they owed. That double benefit has convinced me that the scheme should be extended for the whole of the next Parliament.
	On top of giving small businesses more time to pay taxes, I want to reduce their taxes, and to help them invest and expand. First, business rates are a fixed cost from the moment a company moves into its premises. The Federation of Small Businesses says that that is the third biggest cost after salaries and rents. To help fledging businesses set up, as well as existing ones, I have decided to cut business rates for one year from October. That means a tax reduction for more than half a million small businesses in England, 345,000 of which will pay no business rates at all. That includes 90,000 industrial premises, 60,000 offices and almost 100,000 shops.
	Secondly, I am determined to make sure that the tax system does not hold back decisions to invest during the economic recovery. Scrapping investment allowances, as some have proposed, in order to pay for an overall rate of corporation tax, makes no sense at all. It would mean, for example, that manufacturers and many smaller companies would see their tax bills increase, whereas banks would get a windfall profit. So, instead, I want to help small businesses to expand by doubling the annual investment allowance to £100,000. As a result, 99 per cent. of businesses will be able to deduct from their taxable profits in the first year all investments in plant and machinery.
	Thirdly, I am going to make it more attractive for wealth creators and innovators to set up their own businesses. To do that, I am doubling entrepreneurs relief for capital gains tax. At the moment, the first £1 million of lifetime gains are taxed at a lower rate of 10 per cent., rather than at the main rate of 18 per cent. That threshold will now increase to £2 million, enabling entrepreneurs to benefit more from their effort and investment. I can also confirm today that I am not increasing the main rate of capital gains tax.
	Better access to finance, improved procurement, lower taxes and more time to pay-this is benefiting hundreds of thousands of small businesses and providing the backbone of future economic growth and jobs.
	Investment in both traditional and new infrastructure is also vital if our economy is to grow and our businesses are to succeed. We have to move goods and people around the country and around the globe. It is no good supporting high-speed rail links in principle but declining to back plans that might lead to local controversy. The Government are taking forward plans for a high-speed rail link from London to the midlands and then to the north and Scotland. In government, we have taken the tough decisions to improve our transport links and to cut delays in our planning system. Plans for Crossrail and Heathrow, along with high-speed trains, will improve transport in this country and will support some 100,000 jobs over the coming years.
	Roads, of course, are an essential part of our transport network. The bad weather of the past few months has taken a damaging toll on their condition, so I am providing £100 million to pay for repairs to local roads throughout the country and £285 million to pay for improvements in the motorway network, including by expanding capacity by allowing hard-shoulder running. For that and other measures there will be consequential provisions, where appropriate, for Scotland, Wales and Northern Ireland.
	Improving our infrastructure also requires us to renew and modernise our energy supplies. Again, our competitors are not standing still. China is building a new power station every week to meet its growing energy needs. We need to take long-term decisions to secure our supplies, while moving to a low-carbon economy. That means replacing our ageing nuclear power stations and investing in renewable energy along with sustainable transport.
	In last year's pre-Budget Report, I set up Infrastructure UK, to advise on how our country can achieve those vital goals. Today, it published a new strategy setting out a route map and the investment that will be needed. To deliver this ambition, which is vital for future jobs and the health of our planet, I am setting up an investment bank. It will control £2 billion-worth of equity, half of which will come from assets, including the channel tunnel rail link, and the rest will be matched by private investment.
	That equity will unlock billions more of finance from the private sector. The fund will focus first on investing in green transport and sustainable energy, in particular offshore wind power, where Britain is already the world leader. To strengthen the position further, we are offering £60 million to develop ports to host manufacturers of offshore wind turbines. That will help the UK to secure new inward investment deals and support thousands of extra jobs in these sectors.
	The UK has the potential to be the world leader in the digital economy. Realising this ambition would create thousands of new businesses and hundreds of thousands of new jobs. It would also open the way for public services to be delivered more effectively and at lower cost. Access to high-speed broadband is essential to deliver these goals. We have taken the decision to ensure that the benefits are spread to rural as well as urban areas and are not limited to the better-off. The 50p monthly landline duty will unlock private investment and enable 90 per cent. of the country to access the next generation of fast broadband by 2017.
	I now turn to how we will give targeted help to British industry to realise its global potential. The role of modern government is to work with key sectors to help them compete and prosper. We will not go back to the interventionism of the past, but nor can we return to the hands-off approach of the free-marketeers.
	It is also through partnership, not indifference, that Britain can and will succeed. It is a source of pride that 50 per cent. of all Ford diesel engines in the world are now produced in Britain's cutting-edge engineering plants. That is testament to the commitment of their staff and the high quality of their research and development, but the Government have also played a part, with financial support, in this success story.
	The Government, again, cannot develop and manufacture electric cars, but we can provide the support to help these projects to take place in Britain. The announcement by Nissan last week that it is to produce in Sunderland its first mass-produced electric car was a vote of confidence in British engineering and its work force, but this ground-breaking venture would not have happened without our support to unlock this private investment. It is precisely that co-operative approach that will ensure our country competes successfully on a global scale.
	The same partnership is being built in the life sciences sector, which already employs over 120,000 people. Our approach can be seen in the patent box, for example, which offers tax breaks on income from patents held in the UK. That will lead to more products being manufactured here in this country.
	Our creative industries are also a huge source of jobs, wealth and pride. I will offer help to the computer games sector, similar to the steps that are helping to restore the fortunes of the British film industry. It is a highly successful and growing industry, with half its sales coming from exports, and we need to keep British talent in this country.
	From advanced manufacturing to pharmaceuticals, and from digital communications to creative arts, it is the ideas that are driving their success. Building on the Hauser review, we will ensure that the UK's technology and innovation centres achieve their potential to commercialise new British discoveries. We have also strengthened the links between universities and business to ensure that ideas are harnessed for commercial success, but we need to do more, so we will set up a £35 million university enterprise capital fund to provide direct support for university innovation and spin-out companies.
	Along with the impact of new ideas, it will be the ambition of young people that will carry this country to success. We need to invest in skills, education and our centres of learning. Over the past 13 years, we have increased the number of places and funding for universities by 25 per cent. Almost 400,000 more of our talented young people now go on to university than in 1997. Given this unprecedented rise in investment and the need to tighten public spending overall, universities must make efficiency savings while focusing their funds rigorously on quality teaching and research. We are determined to achieve that without damaging key skills and our economic strengths. To help them to do this, we are going to provide extra one-off funding of £270 million in 2010-11 through a modernisation fund that will help universities to create 20,000 more university places, largely in key subjects such as science, technology, engineering and maths, starting in September this year.
	The extra places allow us to strengthen our offer to our young people and ease parents' concern that their child's first taste of life after school or college will be a prolonged spell on the dole queue. We have seen in past recessions what a waste of potential that was and the long-term damage that it caused. Because of the choices that we have made, every school and college leaver, as well as every recent graduate, under the age of 24 will receive personal help and new opportunities. That will be delivered by a guaranteed place in education or training for all 16 and 17-year-olds, a guaranteed job, work experience or training for every 18 to 24-year-old, supporting a higher number of apprenticeships, and more university places for those who want them.
	The cost of this £2.5 billion one-off growth package to invest in Britain's future will be met partly by switching resources from existing budgets and, as I said, by the higher revenues from the tax on bankers' bonuses. I expect that cost to be repaid many times over in the coming years in new jobs, new opportunities and greater prosperity.
	This recession has had an impact on people across the world. It is often the most vulnerable who are affected most-those in insecure jobs or on modest incomes. While people are suffering hardship, it is all the more unfair that some are escaping their tax obligations. I am determined to continue our successful drive to prevent avoidance and evasion.
	Measures in this Budget will bring in additional tax worth half a billion pounds each year, while protecting £4 billion-worth of revenues by 2012-13. These steps include tax agreements such as that already signed with Liechtenstein, which is expected to bring in around £1 billion of extra revenue. I can also now tell the House that we are ready to sign tax information exchange agreements with three additional countries: Dominica, Grenada and Belize. I have a further announcement to make: we expect these deals to be signed within a few days, which is rather quicker than the 10 years it has taken Opposition Front Benchers to exchange information with the deputy chairman of their party.
	We are proud of our achievements in helping families and tackling child poverty. For the new born, there is an additional element of the child tax credit, as well as the child trust fund-something which, I know, will now be even better news for certain Members of the House. Pre-school children are benefiting from a massive expansion in free child care places, and I want to do more to help the parents of one and two-year-olds by increasing by £4 a week the money paid through child tax credit from 2012. That extra money will be paid for all children who need it, whether their parents are married, living together, or living apart.
	We have also tackled pensioner poverty. In 1997, hundreds of thousands of pensioners lived on a basic state pension worth about £62 a week. From next month, because of above-inflation increases in the basic state pension and the introduction of the pension credit, every pensioner will be entitled to a weekly income of £132.60. We have announced increased personal allowances for older pensioners, which will mean that, from April next year, no one over 75 will pay any tax on the first £10,000 of their income.
	The cold weather conditions of the past few months have underlined the importance of the winter fuel payment for many pensioners. Over the past two years, those payments were temporarily increased to £250, and £400 for the over-80s. Without action today, the winter fuel payment would have decreased in value this coming winter, but I have decided that that would be unfair, so I will guarantee this higher winter fuel payment for another year. That means that 9 million pensioner households will receive at least £250 this winter to help with their fuel bills. In line with our values and fairness, help for pensioners, families and homeowners over the coming year is paid for by closing down tax loopholes, as I have already announced.
	I believe that the Government have made the right choices to rebuild our public services. When faced with the upheaval of the global recession, we made the right choices to support the economy, businesses and families. Because of the steps we took, opposed by the Conservatives, the recovery has begun, unemployment is falling and borrowing is better than expected. The choice before the country now is whether to support those whose policies would suffocate our recovery and put our future at risk, or to support a Government who have been right about the recession, right about the recovery, and right about supporting people and businesses in this country to build a prosperous future. I commend the Budget to the House.

Motion made, and Question proposed,
	(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
	(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide-
	(a) for zero-rating or exempting a supply, acquisition or importation;
	(b) for refunding an amount of tax;
	(c) for any relief, other than a relief that-
	(i) so far as it is applicable to goods, applies to goods of every description, and
	(ii) so far as it is applicable to services, applies to services of every description.- (Mr. Darling.)

David Cameron: So there we have it-Labour's big idea is a stamp duty cut on homes worth less than £250,000. Where on earth did they get that one from? That has been Tory policy for three years. The Chancellor came in copying our inheritance tax cut. He leaves as Chancellor copying our stamp duty cut.
	The only new ideas in British politics are coming from the Opposition. The only things that Labour brings are debt, waste and taxes. Here is a first. The centrepiece of this Budget, the stamp duty cut, has already been torpedoed by a Treasury Minister. This is what the Economic Secretary said about the policy:
	"raising...stamp duty...threshold to £250,000 would not be an effective use of public money".
	First, the Government denounce it, then they embrace it.
	That is not all. Remember our tax plan for super-strength cider? When we announced it, the Chancellor's spokesman said that that was illegal. It is now official Government policy. Remember our proposal for 10,000 extra university places? The Higher Education Minister said:
	"It is clear, as has been demonstrated in the House today, that this fatuous proposal of an extra 10,000 places is elitist"-[ Official Report, 16 March 2010; Vol. 507, c. 802.]
	That is what the Government said about it. Once again, they have been caught taking the public for fools. The Chancellor spoke for an hour. He could have done it all in a sentence. Labour has made a complete mess of the British economy and is doing nothing to clean it up.
	One figure in the Red Book stands out above all others. They have doubled the national debt and, on these figures, they are going to double the national debt again. In this election year they are borrowing £167 billion. We are meant to be impressed that that has turned out a few billion lower than the last disastrous forecast, but it is still-hon. Members should be ashamed of this-more than every single Labour Government in history ever borrowed, added up together. That is what they have done. Like every Labour Government before them, they have run out of money, and they are leaving it to the next Conservative Government to clean up the mess.
	Today the Chancellor had his last chance to do the right thing for the country. He totally failed.  [ Interruption. ] Labour Members are leaving. The taxis for hire are on their way out of the Chamber. The Government are just going to carry on spending, carry on borrowing and carry on failing. The biggest risk to our recovery is five more years of the present Prime Minister-five more years of falling confidence, five more years of bloat and debt and taxes, five more years of Britain closed for business. Most members of the Cabinet are looking at their Blackberries. They cannot think of a single reason why the country should have another five years of the Prime Minister, so I say let us have an election and put them out of their misery.
	Let us have a look in detail at the appalling mess that the Prime Minister and Baldemort seem to find so funny. Here are some of the things that the Government did not tell us in the Budget. They boasted about trade. They did not tell us that page 171 of the Red Book just published says that the trade deficit has risen by £7 billion. They told us about investment. They did not tell us that page 169 of the Red Book shows that business investment is falling by 5 per cent. this year. Almost everything that they have told us about the economy has turned out not to be true.
	The Government told us they would be prudent. The Chancellor has just said that they will borrow £734 billion over the next six years, giving us a national debt of £1.3 trillion. They have confirmed in the Red Book that the deficit this year at 11.8 per cent. of GDP is the worst in the OECD except for Ireland. That is what the Labour Government have left us with. They talked about education and its importance. Next year they will be spending more on debt interest than on educating our children. They told us endlessly that they had abolished boom and bust, but the figures show that they have given us the deepest recession since the war. The figures show that we lost 6.2 per cent. of our GDP in total.
	The Chancellor endlessly boasted about the action that the Government had taken. We have the longest and deepest recession since the war. They should be ashamed. They speak endlessly about their brilliant judgments, yet we were the first into recession and the last out of recession. They talk endlessly about their great judgment and about how well prepared we were. We went in with the biggest Budget deficit, and we come out with the largest Budget deficit. And of course they promised us real help now, yet more businesses went bust in this recession than in any other, and more people have gone bankrupt under Labour than ever before in our history.
	What about all the schemes that the Chancellor mentioned, which were launched with great fanfare? How many people did they help? Let us take the mortgage support scheme, which was announced in December 2008. The Government said:
	"This is real help for homeowners".
	So how many households did it help? Fifteen. That cost £66,000 per household helped; or, to put it in currency that the Cabinet can understand, that is about 13 days of Geoff Hoon's consultancy fees.
	The Government told us endlessly how brilliantly they had done on unemployment and what a triumph they had achieved. One in four adults of working age in our country are not in work. They talked about European comparisons. We have more young people unemployed than anywhere else in Europe.
	To be fair to the Prime Minister, there is one forecast that he got spot-on. He told an audience of bankers:
	"What you as the City of London have done for financial services, we as a government intend to do for the economy as a whole".
	That is a pledge he met in full.
	Thirteen years on from 1997, we can now see what has happened. In 1997, debt was £350 billion. Now it is getting on for £860 billion. In 1997 the deficit was £6 billion. That is what the Labour Government inherited-a £6 billion deficit. Today it is £167 billion. In 1997 we were ranked seventh in the world for competitiveness. Now we are 13th. We were fourth in the world for tax and regulation. Does anyone want to know what we are going to do? We are going to get back to fourth in the world for tax and regulation.

David Cameron: Sit down.
	The Prime Minister and the Chancellor faced a choice between bold action in an election year and just playing politics, and once again they chose politics. This Prime Minister will never get a medal for courage-although it has to be said that most of his Cabinet get mentioned in "Dispatches".
	A credible plan also requires some honesty; instead, we got double-dealing. All those figures they told us about debt are based on their growth forecast. So let us have a look at the growth forecast-their record of predicting growth. In 2008, they said that we would grow by 2 per cent.; in fact, the economy grew by 0.5 per cent. In 2009, they predicted a decline of 3.5 per cent.; in fact, we shrank by 5 per cent. Now they say that the economy will grow by 3.25 per cent.; the independent experts say 2.1 per cent. The Chancellor told us, standing there at the Dispatch Box, that his forecasts were the same as the Bank of England's: they are not. The Bank of England is forecasting 3.1 per cent. this year and 3 per cent. next year, compared with his forecast of 3.5 per cent. With the former Chancellor, you used to have to go through the fine print before you found out about the rubbish in the Budget; this time, the rubbish came straight from the Dispatch Box. Having given us the lowest decade for growth since the second world war, they are now predicting one of the highest. They have given us the biggest bust in British history, and now they are forecasting an almost permanent boom. Why on earth should anyone believe what they say any more? What we need is a proper independent office of Budget responsibility, which we would set up to set independent forecasts and to keep the Chancellor honest.
	We need to get Britain back open for business. Again, this Budget completely fails the test. The Chancellor spent half an hour talking about helping business, but the fact is that he is raising £19 billion of extra taxes, many of them charged on business. Why? Because they flunked the difficult decisions on spending and they are raising tax after tax after tax. There are the fuel duty rise, the broadband tax, and the new taxes on small businesses. He talked about a cut, but he did not mention what happens on 5 April, when the revaluation and the end of transitional relief come in, hitting every small business in the country. Biggest of all is the rise in national insurance, which is a tax on every single job in our country. They want to tax your car, your phone, your business, and your jobs. These are the ticking tax bombshells that are timed to go off the day after the election, and that will destroy our recovery. Instead of more waste, more spending, and more taxes, what this Budget needed to do was to ease the burden on our families and businesses and let enterprise flourish. That is what a Conservative Government will bring. Let us freeze the council tax. No tax on new jobs for new businesses. Lower corporation tax rates and lower small business tax. Radical school and welfare reform. That would be real action to get our economy moving.
	This Prime Minister is going around telling everyone, "Stick with me-stick with what you know." But that is the whole problem-this country is stuck with him. Our economy is stuck. Business is stuck. Nothing is moving. Then there is the arrogance of it. "Stick with me." "Why?" "Because I doubled the debt, I put up your taxes, I wrecked the economy, and I mortgaged your children's future." It is like the captain of the Titanic saying, "Let me command the lifeboats." It is like Robert Maxwell saying, "Let me reinvest your pension." It is like Richard Nixon saying, "I'm the man to clean up politics." Does the Prime Minister really expect the British people to turn round and say, "Thank you for nearly bankrupting the economy?" Find me the small business owner who would wake up to a Labour victory and say, "Thank God we've got five more years of this red tape and taxes." Find me the family who would think, "Great, national insurance is going up and we're all going to be better off." Find me the international business that would think, "Yes, now's the time to invest in Britain." No one has yet thought of a question to which the answer is five more years of this Prime Minister-and that's because there isn't one.
	We need an unleashing of enterprise across this nation. We need a plan to boost employment through radical welfare and school reform. It is time that this country had a radical change of direction. We need a Conservative Government to clean up the mess made by this Labour Government and to stop another five years of debt, waste and taxes. Britain does not need this Prime Minister and this Chancellor-it needs new energy, leadership and values to get this country going again. That is the argument that we will take to the country the moment this man runs out of time and calls that election.  [ Interruption. ]

Nicholas Clegg: This Budget has been billed as the preface to the Labour manifesto. Based on what we have seen today, it will not be a manifesto but an obituary. The Prime Minister may have wanted a "giveaway Budget", but what we got was a "given up Budget". This is not the preface to a new Government but a footnote to 13 years of failure. After 13 years, the gap between rich and poor has widened. The poorest 20 per cent. pay a higher proportion of their income in tax than the richest-so much for fairness under Labour. We have had the most prolonged recession since the 1930s, and the spectacle of state-owned banks doing deals that put British people out of work. We needed real change. We needed a Budget that gave us honesty on spending and fairness on taxation. We got neither.
	The spat that we have just seen, with the Leader of the Opposition saying that cuts should come now, is a phoney war about when to make cuts to cover up the fact that he and the Chancellor are both the same. Neither has the courage to come up with the details of the cuts that we will need in the years ahead to tackle Britain's deficit. Neither is being straight with the British people about the tough times ahead.
	This Budget was a Budget in denial about the scale of change needed-it was about as honest as the CV of the right hon. Member for North Tyneside (Mr. Byers). It is built on growth figures that are unlikely to materialise. It is built on false comfort from a small drop in borrowing that does not affect the structural deficit; we are still borrowing £450 million every single day. Above all, it is a Budget in denial about the unavoidable cuts and savings ahead. The Chancellor claims to have identified billions of pounds of cuts, but there is only real detail about a tiny fraction of the total. Everything else that we have heard today is insubstantial waffle about so-called efficiency savings and a tiny saving in the relocation of civil servants to places outside London.
	On the other side of the Chamber, we have heard tough talk about the need to be honest on the deficit, but the Conservatives have barely a fig leaf of detail to back up their claims. They say that we need more than £40 billion of cuts by the end of the next Parliament, but they have published details about just £2 billion. Their demands for honesty come straight from the Karl Rove school of politics: make the biggest fuss about the subject on which you have the most to hide. Labour is in denial and the Conservatives are talking tough to cover the truth-they offer more of the same.
	We needed a Budget that gave us honesty in spending and fairness in tax. We got neither. We Liberal Democrats are putting our cards on the table. We have identified a first instalment of £15 billion of cuts that can be realised by 2012-13: saving half a billion pounds a year by ending Government contributions to child trust funds; saving £1.3 billion a year by stopping means-tested benefits for the top 20 per cent. of tax credit claimants; cancelling identity cards and second-generation biometric passports, saving £2.5 billion over the next Parliament; and making longer-term savings, too, by saying no to the like-for-like replacement of Trident. Those are savings that we will need to start implementing once the economy is strong enough to take the strain. The Chancellor could have made some of those choices today, and so could the Leader of the Opposition, but what do we hear from both of them? Nothing. Lots of noise and no honesty whatever.
	One of the Government's most shocking sleights of hand in recent months has been to try to duck blame for the recession. Yes, there were global forces at play, but most of the problems started right here at home-the over-dependence on the banking industry, the personal debt bubble encouraged by this Government and the over-inflated housing market that Labour did everything in its power to stoke up.
	On the stamp duty reforms announced today, of course we welcome any moves to make the system more progressive, but with 1.8 million families still on a waiting list for an affordable home, it is quite astonishing that this Budget was completely silent on the urgent need for more affordable homes for all. The Chancellor has added to that by a change to housing benefit announced today that will make life impossible for low-income families in high-price areas such as London. Labour should stop trying to kid people about this recession. They got us into it, and only by being honest about how we got into this mess will we ever be able to get out.
	I turn to a few details of today's Budget. The Chancellor has only slightly modified his wildly over-optimistic growth forecast, to between 3 and 3.5 per cent for 2011, against a consensus everywhere else from independent forecasters of 2 per cent. He cannot bury his head in the sand just to hide the truth about how long it will take to reduce the deficit.
	The Chancellor spent a good portion of his speech boasting about the £11 billion he claims to have saved on unemployment costs and through unexpected higher tax revenues. He is living in a fantasy land. This Government still came in £167 billion over budget last year. That is no record to boast of. Someone living off their credit cards and thousands of pounds in debt is not suddenly flush with cash just because their phone bill comes in slightly cheaper than he predicted. We are not better off; we are just ever-so-slightly less worse off.
	Even with unemployment lower than originally forecast, we still have more than 2 million people unemployed and 8 million economically inactive. Of course it is sensible at a time of mass unemployment to direct money to help young people especially. I only wish the Chancellor had had the courage to go further and shorten the guarantee for young people from six months to three months. One in five young people are still out of work, and waiting around for six months before they get any help pushes many of them into a state of real desperation.
	I welcome, of course, the way the Chancellor has more or less carbon-copied our long-standing proposals for an infrastructure bank and support for green industries to stimulate more job creation. On fuel duty, I note the Government's decision to stage future increases, but they are missing the point. There is a fundamental problem with fuel duty in rural areas where using a car is not a luxury but a necessity. The real priority should be to help rural areas, not just a staged reprieve.
	One of the most shocking omissions from this Budget was the failure to address the systemic failures in our banking system. We bailed out the banks to the tune of £1 trillion, and they are hoarding money that should instead be lent to businesses, killing off sound businesses and people's jobs. The banks are even helping to support deals that put British people out of work, such as the Kraft takeover of Cadbury.
	The failure to get the banks lending is the absolute centrepiece of the Government's economic mismanagement. The Chancellor today promised new bank lending targets, but why should anyone believe a word he says after what happened last time he made such promises? RBS and Lloyds were told to increase net lending by £27 billion. Instead, they have decreased it by £41 billion. Moving to gross rather than net lending targets is a con that will let the banks off the hook again.
	The Government must now recognise that their heavy pressure on the banks to rebuild their capital bases is limiting bank lending and threatening the health of the economy in the longer term. The banks end up hoarding money instead of lending it. The priority for the nationalised banks in particular should be putting money into the real economy, not into their balance sheets.
	Turning to bankers' bonuses, the Government raised more than £2 billion-more money than they had expected-from their tax, but that is because the banks refuse to change their behaviour. It is amazing how much the banks are willing to pay to get back to business as usual. A decent Budget would have set out a plan to ensure that they can never do that. We must ensure that the high street banks on which families and small businesses depend are never again put at risk by the casino culture of investment banking. As the Governor of the Bank of England has repeatedly recommended, we need to separate high street and investment banking for good. Until that split is introduced, all banks will remain the beneficiaries of a unique, open-ended guarantee against failure from the taxpayer-a guarantee that they should pay for. That is why last year we proposed a new levy of 10 per cent. on the profits of the banks until they can be split up.
	I will give the Chancellor credit at least for some consistency. He has always opposed our plan for that, as he has today, while the Conservatives first ruled it out, then ruled it in, only for their latest proposed bank tax to fall apart in less than 24 hours. Both parties are wrong. Britain is unique in the world in the liabilities of our banking industry relative to the size of our economy. We do not have the luxury of time and we have to protect ourselves against a future collapse.
	Finally, on tax, the other gross disappointment in this Budget was the failure to make our tax system fair. Under Labour, the bottom 10 per cent. pay a staggering 48 per cent. of their income in tax, while the richest pay 34 per cent. The Chancellor took pride in saying today that he would make no big announcements on tax. How can he look at a system such as that and say, "Let's have more of the same"? Indeed, his comments seemed to suggest a freeze in income tax rates, which would, if earnings rise, once again hit the poorest hardest. So much for fairness under Labour. How can he happily accept that it is okay for a banker in the City of London to pay a far lower rate of tax on their capital gains than their cleaner does on their wages? So much for fairness under Labour.
	The Liberal Democrats propose the most radical tax reform in a generation, hard-wiring fairness into Britain's taxes once and for all. We will ensure that no one pays tax on the first £10,000 that they earn, paid for by closing loopholes that unfairly benefit those at the top, by a mansion tax and by higher taxes on aircraft. That would mean complete freedom from income tax for 3.6 million more low earners and pensioners, and £700 in the pockets of tens of millions more. Crucially, it would be a down-payment to the British people, who are about to take the brunt of the biggest fiscal contraction in post-war history. It would be a declaration of intent-yes, there will be change, but we guarantee it will be fair. Action on tax is the only way to ensure that we can take people with us down the difficult road of deficit reduction. Only the Liberal Democrats are prepared to make real changes in tax to help the millions of people who simply need a break.
	After 13 years of Labour, Britain is ready for something different. As we stand on the brink of an election campaign in which there is everything to play for and the future of the country is at stake, my message is simple: this Budget is the old politics, and the old politics is not good enough any more. It is time for honesty in spending and fairness in taxes, and the only party that offers both is the Liberal Democrats.

John Redwood: I am grateful to the Chairman of the Treasury Select Committee for giving way. Is the right hon. Gentleman aware that, last year, in respect of Lloyds bank, which is partly state owned, the amount of loans outstanding fell by £50 billion, despite all the ministerial exhortations?

John McFall: The Treasury Committee has persistently focused on that issue, and this morning I was at a business breakfast with small business representatives, who outlined the problems with lending. At the time, we said to the Chancellor that the lending agreements had to be more transparent-there is a problem with them-but I welcome the additional £90 billion that the Royal Bank of Scotland and Lloyds will provide. We really need to get that lending to small businesses, so the initiatives in the Budget are welcome.
	To some extent, however, the uncertainties, whether about credit or the wider economic outlook, remain. The fear of a double-dip recession raises its head every now and again, and monthly data releases are analysed to within an inch of their lives-only to be revised in the following month. In the face of those uncertainties, the Government must act as a buffer, providing support to the economy as the private sector recovers from the banking crisis and resultant recession. That of course has a worrying effect on the public finances, but at times of crisis it is necessary for a Government to support people. The Government must ensure that hope for a better future is not lost, and that will be a theme of the general election. Yes, times are difficult, but we must offer hope and a future to people if they are to maintain their faith in the parliamentary system.
	None of us can deny that the choices that we are to make on spending or taxes are difficult, and good decision making requires accurate and timely information. That is why the Treasury Committee, in its report on the pre-Budget report, urged the Government to provide more information. On one such point, we noted:
	"There is a sense that the Treasury are using uncertainty to suit themselves. Despite substantial uncertainties they still produce some forecasts out to 2014-15 and illustrative projections out to 2017-18. We can see no good reason for the Treasury failing to produce illustrative figures for future expenditure, at least the projected split between DEL and AME. We recognise that there will be uncertainty in these figures, but they are produced as part of the Spending Review process".
	So, with the spending review process in the autumn, I look forward to those figures becoming clearer.
	The deficit will have to be tackled, but perhaps more importantly it has to be seen to be tackled. We must satisfy the markets and, more importantly, the people that the deficit is in hand, regardless of our political affiliations. I should like to offer the following notes-some may say, crumbs-of comfort from the Governor of the Bank of England, who, at the Treasury Committee's hearing on the February inflation report, said:
	"I think it is very clear we have political consensus on the need for fiscal consolidation. We have a very good track record in the past at meeting our obligations. We have our own currency which gives us greater freedom of manoeuvre and we also have a public debt which has a much longer maturity so that we are not faced with the same rollover refinancing problems which affect many other economies. The UK should be grateful that we have the maturity of our public debt which is almost twice that of any other country."
	That comment is very important, particularly in the face of the deficit hawks who want to cut now and cut severely.
	We must tread the path of the next few years carefully. The public sector will have to step back and allow the private sector to play a leading role in growing our economy, but we must ensure that the timing is right and we do not crowd out private sector growth with too much debt-fuelled public sector spending. [Hon. Members: "Hear, hear."] But, the dangers are equally treacherous on the other side. If the private sector is so sickly, as it is at the moment-whether owing to a lack of confidence or credit, or because it cannot grow as fast as needed-we risk losing more people to unemployment. So I welcome the Government's commitment to support people and businesses during these difficult economic times.
	There is some evidence to show that the Government's action on the economy is working-the number of companies being wound up falls far short of the numbers seen under the previous Tory Government in 1992. To withdraw that support too soon, in the name of balancing the books, would be nothing less than economic suicide. Thousands of people's livelihoods depend on that support remaining in place until the economic recovery is secure. If we were to withdraw it, the fiscal position might deteriorate, not improve, because we would have to deal with the costs of mass unemployment and mass business insolvencies. They would not just represent short-term costs on the public purse, but would create lasting, long-term problems. Mass unemployment turns into worklessness, as we saw in the 1980s, and unnecessary business insolvencies lead to permanent losses in the skills and productivity of the UK's work force.
	The Treasury Committee was especially concerned about young people in the current economic climate. We noted:
	"We remain concerned over the levels of youth unemployment. While the story for the overall labour market has been more positive than might have been initially hoped at the start of recession, the young have, as we feared, been badly hit. We note the Government's measures in this area, and will continue to monitor their impact."
	I welcome the measures on youth unemployment, because I speak not only as a parliamentarian, but as a former school teacher: one who taught in the 70s and 80s; and one who met his former pupils 10 years later, married or with partners with children, and asked them whether they had a job. They told me no. The impact on many young people, and at an early age, is terminal, and that is why we have to support them through that time of hardship.
	Let us not forget that 600,000 young people leave full-time education each year, and it is vital that they have education, training or employment opportunities. Labour market economists, supporting what I said earlier, say that a person who suffers six months' unemployment aged 18 can feel the effects for decades. Even when they reach 50, they might still earn less than they would have had they not been unemployed. So, without the Government's targeted support for young people, we could go back to the 1980s and see a new generation of worklessness in the UK. All of us must strive to ensure that that does not happen.

Michael Jack: I am grateful to my hon. Friend for that comment, because it raises a wider issue about economic management. I know, having served in the Treasury, that the whole of the Government's economic forecast is, effectively,0 based on their own estimates. They convince themselves that the numbers they want to work with are correct, they look around for some justification, and then, when they have a growth figure, everything else falls into place from that.
	I must let out a secret: I remember sitting in the Treasury during my last Budget there, when we were down to arguing about the last quarter point on growth. Given the political consequences of not having it-the lower revenues and the knock-on effect on public expenditure-a quarter point between friends is not that much. We could add a little bit on and tweak the numbers. Obviously, however, a quarter point on growth either way can have a significant effect on the level of public expenditure, tax revenues and so on that come out at the other end of the pipeline.
	We have to stop this illusion that there is a source of economic knowledge that is absolutely correct. It is forecasting, and forecasting is exactly what it says: people try to use the best data to say what they think will happen, respecting the fact that they will probably get some of it wrong. My hon. Friend the Member for Chichester (Mr. Tyrie) pointed out that there is about a 1 percentage point difference between the sum total of what the best of the private sector economists are saying and what the best of the public sector economists are saying. Given that we have handed over monetary policy to the Bank of England, a strong case can be made for saying that before the Chancellor goes nap on only his forecasts, there should be a mechanism to take into account what the best of the rest are saying. A 1 percentage point difference has such a profound effect on the future of the economy.
	If I could make one wish for those who follow me in Parliament, although not in the Treasury-I have had my time there-it would be that there ought to be a tacit understanding that before a growth number is seized on, we need to reconcile public and private forecasts.

Ian Taylor: Because any business activity is inevitably impacted, for good or ill, by a Budget, may I begin by drawing attention to the Register of Members' Interests?
	Like several other speakers this afternoon, this is my valedictory. The hon. Member for South Derbyshire (Mr. Todd) and my right hon. Friend the Member for Fylde (Mr. Jack)-and, I hope, myself-are going when our constituents are sighing woefully, as opposed to with tears of joy. In a sense, I am going when there is still some energy left in this body, after 23 years of service in this House.
	I am also leaving with some sadness, as this has been a fascinating period. When I first entered the House, I served on seven successive Finance Bills, which might be considered slightly beyond the call of duty. Because of the magnificent economic management of the Conservative Government, that did not mean seven successive years-in at least two years there were two Finance Bills.
	I look back with some degree of pride that I got a reputation for boring for Britain in favour of employee share-ownership schemes at a time when they were not fashionable. I am delighted that the current leader of the Conservative party has, in revitalising the party, revitalised that idea, particularly in the social field. I welcome that enormously. When I came up with that idea in the late 1980s, I thought its time had come, and I even wrote a pamphlet for-remarkably-the Adam Smith Institute. Given my other views, that was an offer I could not refuse. That idea is now mainstream. I was also-I think-the first person in the Conservative party to write a pamphlet on corporate social responsibility. Again, that was slightly out of time, because only now is it mainstream Conservative policy. In a sense, I am going just when the party has caught up with me. I suspect, therefore, that my party is rather pleased that I am going.
	The Budget is strange-it is a fag-end-of-a-Parliament Budget. We do not know what the election result will be, but I obviously hope that my right hon. Friend the Leader of the Opposition becomes Prime Minister. He has revitalised the Conservative party and I hope that he will revitalise the country. We might not know what will happen in the election, but we do know that the Budget does not give much guidance on what must happen the moment the election is over, when we must begin to take things seriously.
	Of course, there are some nuggets in it. I was rather delighted that there might be some relaxation regarding automatic retirement at age 65. I am retiring from the House just before I am 65, but I hope to do other things outside. I was thrilled with the potholes money-I believe it was £100 million. Surrey county council could probably make use of the whole of that fund judging by the size of the potholes in my county. I hope that the Treasury looks kindly on the much underfunded and neglected county of Surrey, part of which I have served for all of those 23 years.
	Otherwise, the Budget rather misses the big challenges. One thing I did not see was any concept of our international position. We have a relatively weak currency at the moment, which is normally regarded as a good thing-people say, "Terrific. We can get manufacturing and other exports rising." However, that requires markets into which we can sell, and many other countries are undergoing great difficulties at the moment.
	I have been known, from time to time, as being rather positive about the European Union, from which I do not resile. However, I wish my friends in the German Government would wake up to the reality that they cannot continue to have the surplus they have and a stable monetary zone within the European Union. By the way, Portugal has had its fixed rating reduced today, so it is being fingered as country with a higher risk than is appropriate within the eurozone. We already know about the Greeks and I suspect that Spain is sweating on its credit rating, but the German Government must get their act together. Germany is the motor of the European Union and, regardless of whether or not we are in the euro, one of the motors of our exports, so it is vital that it understands that there is an obligation, which is ultimately in its interest. It is not just about China, as my right hon. Friend the Member for Fylde said.
	I mentioned China because its reserves, given the level of the renminbi, could be tremendously destabilising. The Americans are getting a little belligerent and asking whether they should impose import duties on Chinese goods, but they should remember that if it was not for the Chinese buying dollars, the dollar would be in a state of genuine crisis, which would have big knock-on effects on domestic interest rates. We do live in this global economy and although I certainly do not share the Prime Minister's view that he saved the world during the middle of the debt crisis, I give him credit for understanding that, regardless of the problems in UK, this was solvable only by looking around the world and trying to get agreement. That will have a considerable impact on the way in which we begin to structure the recovery.
	Inevitably, there will have to be what is called a "fiscal contraction", which can be either an increase in tax or a reduction in expenditure. We have had a sterile debate at times this afternoon. No party is advocating no cuts, because that would be unsustainable. I note two things in this regard. Page 11 of the Red Book shows that debt interest is now £43 billion a year which, as my right hon. Friend the Member for Wokingham (Mr. Redwood) said, is greater than the defence budget and twice the budget of industry, agriculture and employment. If one looks down the page at the figures on receipts, one sees that debt interest takes up the whole of the receipts from corporation tax. That is just an unsustainable situation, and it is occurring when rates of interest are artificially low. I am not saying that they should not be at their current levels, but if interest rates were to start to rise, debt interest would become dramatically higher and would begin to swamp excise duties, which raise only £46 billion. The relationship between these sums is important. A better way of trying to explain to the British people that we have a problem might be to tell them that we are fighting a war in Afghanistan-my son is a soldier, and he is now safely back from Afghanistan, having served his second tour-yet the British Government are spending less on defence than they are paying in debt interest on their borrowings. The public understand that that is unsustainable.
	We want to reduce services without affecting the front-line services and while looking after the people who work in those services, who are wonderful. Any Member of Parliament who visits their local schools and hospitals has a very high regard for the people working in the public sector. The cuts will be painful. The difference in the language used by the Government Front-Bench team and our Front-Bench team is not about whether or not we should have cuts; it is about the fact that the longer one leaves making those cuts, the more dangerous they are likely to be because the deeper they will have to be to convince the markets. The markets are important because of the debt interest that we are already paying, as I have already mentioned. I hope that during the election campaign we will be able to get away from the sterility of the argument, "You are going to cut sooner than we are going to cut" and get on to consider what sort of economy we want to have after we have cut what we will have to cut. That is what I want to focus on.
	During my many years in the House, I have taken a particular interest in higher education, science and space. I was lucky enough to be a Minister with responsibility for science and technology in the mid-1990s-that was up until the 1997 election. That was a fantastic portfolio, and being space Minister was quite interesting. Most of my colleagues rather wanted to send me to outer space, nevertheless the role was a stimulating experience. Within the context of public expenditure constraints, we must preserve expenditure as much as possible in education, science and space and, in some cases, invest, in contradistinction to the cuts that we will need to make in other sectors. We need to do that because what will really determine whether this country will be successful, whether it will punch its weight in the world, whether it will not be increasingly ignored by the G2 of America and China and whether it will have its voice heard not only within the European Union, of which I profoundly hope we are an influential member, but within the G20-it is actually the G28 because some countries want to hang on in there, despite not being part of the G20-is whether we are extremely careful not to destroy the added-value industries and skills that this country will depend upon for growth.
	Our economy is not going to grow again on the back of North sea oil. We have been lucky enough for that to happen in the past decade or two, but North sea oil is disappearing. There are some interesting opportunities for the further recovery of oil in fields that have been part-extinguished, and for deeper-sea drilling, but they will not give our economy the kind of boost that it has previously had. Indeed, it is likely that we will be importing more than 60 per cent. of our gas and oil requirements shortly-perhaps by the end of the decade-from unstable countries such as Russia.
	We will not see a recovery at the same level as before in the financial services industry. I hope that we do not destroy that industry; I do not want to get into the issue of taxes on banks, but we want the banking, financial services and insurance sectors to do well, as they are great drivers of wealth and innovation in the economy, not just for the bankers. The reality, however, is that we will have to stimulate other parts of the economy such as the service sector and the creative industries if we are to survive, to export and to generate wealth. That means doing something to ensure that we do not just cut higher education out of convenience.
	I welcome the comments in the Budget about funding for extra students in science, technology, engineering and mathematics. That is a positive move, although it is not enough. I juxtapose, as the Royal Society did in its recent report, "The Scientific Century", the fact that France has just announced an extra €35 billion in funding for research and development in science, and the fact that we are slicing £600 million from our higher education sector. Some strange concepts about this issue concern me deeply. We need to encourage universities to teach scientific subjects and we must recognise that those subjects are more expensive to teach, pro rata, than arts subjects. In turn, we need to encourage more people to take those scientific subjects, which means offering better teaching in the schools that are the feedstock of our higher education institutions.
	I also want to discuss science and engineering, which are not valued in the public debate as much as they need to be if we are to recover as a knowledge economy. The importance of applied science in particular is not fully appreciated. We have a high regard for our basic scientists and a very high regard for those who get citations published-we punch above our weight as a nation in that regard-but we are not so good at pulling across into reality the innovations that are necessary to enhance our knowledge economy. Again, I noted that there was further funding in the Budget for spin-outs from universities, but I think that we need to look at proof-of-concept-stage financing and to give more encouragement to industry and universities to work together on research projects, because not all ideas come out of universities-quite a lot of them come out industrial research establishments. We are aware of that, but we are fiddling at the edges.
	The Labour Government have rightly taken credit for increasing the amount of money that goes to the research councils; they have more than doubled it since I was the responsible Minister, when I was unable to persuade the then Chancellor of the Exchequer that he should do the same thing. I therefore give credit to Lord Sainsbury for changing attitudes to the research councils. However, it is interesting that both his retirement report, "The Race to the Top", and this month's report from the Royal Society draw attention to the fact that, in terms of expenditure as a percentage of research and development, the expenditure on public R and D is the same now as in 1997, when I left office as the Minister for Science and Technology, at about 0.7 per cent. of gross domestic product. So, despite the increase in the research councils' budgets, there has been a diminution in public investment in science across the board in other Government Departments. We need to be careful about that and to watch it.
	My view is that scientific expenditure stimulates growth in other sectors of the economy, although not always predictably. President Obama has put in place massive science and technology stimulus projects that will have a big effect progressively on the way in which the United States recovers, because it will have a lot of value-added industry and skills in universities. Some of the money going into American universities will attract talent from throughout the world, so there will be an influx of top academics and research institutes, perhaps including those from the United Kingdom. We need to be careful, so I hope not only that science expenditure will be ring-fenced, but that the importance of science will be underlined and understood in Government Departments, so that each Department's chief scientific adviser, and perhaps their engineering advisers, will ensure that every Minister understands the importance of projects that lead progressively to more scientific expenditure and the application of science in Government decision making.
	As I said, I shall make a comment about space, and I make the specific disclosure that I am a non-executive director of a company involved in satellite broadband. I welcomed this week's Government announcement on the space agency; Lord Mandelson and Lord Drayson were right to make the decision. This country needs a stronger position on space activity. It is one of the most innovative industries and contributes about £7 billion a year to the UK economy. It involves cutting-edge technology, a lot of which reads across to the non-space sector. The sector is therefore important, so I hope that my Conservative Front-Bench colleagues will not only endorse the space agency, as I think that they will, but understand that it will need Government funding along the lines that have been announced if it is to bring in the proposed industrial funding, which I know about from the industry and Government policy group report that preceded the space agency announcement.
	Let me focus on a final point that the Government need to take on board and on which I hope my party will focus more explicitly. The Budget included a mention of small and medium-sized companies tendering for Government contracts-I call that smarter procurement. It is vital that that happens, although it is not easy to achieve. The Government spend more than £160 billion on all procurement. For 30 years or more, America has put in place a set-aside of about 20 per cent. of such expenditure for small and medium-sized companies, which leads to a tremendous pull-through. The best form of capital for a smaller company is revenue, so if a company wins an order, it will be much more likely that outside investors will back it. The difficulty in this crucial area arises due to the costs of tendering. The Budget envisages such expenditure representing 15 per cent. of the total, which would mean that upwards of £20 billion a year would go into smaller companies. Obviously, that would have a tremendous impact, and it would be a much greater amount than the budget for the science research base. If we can get this right, as I hope that we will, the results could be dramatic.
	Britain deserves to be a leading-edge, innovative economy. I commend a recent report to Conservative Front Benchers by Sir James Dyson, which covers much of the same ground as, and makes similar recommendations to, a report that I gave to the shadow Cabinet in 2007. The time for such ideas has come, but I felt that the Budget was tired in the sense that it contained a lot of little initiatives, but no real vision of how we can drive this country back into a situation in which we can afford, through the growth of high-technology industries, the very services on which we know that the public depend. That is a real gap. I hope that during the election and beyond it, we will recover our self-confidence and determination not to be dependent on what goes on elsewhere in the world for our livelihood, and show the rest of the world that British industry can compete and that we can have the skills base that will enable us to hold our head up high.
	Those are my final words in the Chamber. I have enjoyed 23 years here, and it has been a privilege. The Esher constituency between 1987 and 1997, which became Esher and Walton from 1997 to the present, has been a wonderful constituency to represent. I have been greatly supported by my wife, whose father was a Member of the House from 1950 to 1961, when he went Upstairs, so we have a long association with the Commons. It has been a great honour for me to serve here.
	I hope that debates in the next Chamber flourish and that Members speak without notes, preferably, because it is a debating Chamber. It would be even more stimulating if people were to think things through and understand what they want to get across to the British nation in the Chamber, rather than waiting to put out a press release. I have enjoyed my time here, and I am very grateful to everybody in the House for allowing me to do so.

Rob Marris: Sadly, 'twas ever thus, was it not, with certain Janus-faced politicians in certain local authorities in the west midlands, and, I believe, elsewhere?
	Let me end by thanking the Government for acceding to a campaign that I, and others, have been running for some time on the question of capital allowances, which are vital to areas such as the west midlands that depend heavily on manufacturing. Let us be clear about the facts. Although there has been a huge decline in the number of people in the United Kingdom who are employed in manufacturing-it is awful for those who lose their jobs, across the west midlands and elsewhere, when factories close-there has been no decline in manufacturing output.
	This is partly to do with what my hon. Friend the Member for Brent, North (Barry Gardiner) said about productivity. Productivity in UK manufacturing across the piece, not necessarily in every sector or every workshop but in terms of the broad figures, has increased a great deal. There are very similar levels of manufacturing output-in fact, they have slightly increased under the present Government-along with markedly lower levels of employment. That is what we get if we increase output per person hour.
	Manufacturing remains vital to the UK economy and its future, both in the context of the way in which the economy runs and as a motor to help us emerge from the recession. It still accounts for roughly 50 per cent. by value of our exports, and I am pleased to say that we are still the sixth biggest manufacturer in the world. I read nonsense in newspapers like  The Daily Telegraph about the death of manufacturing and the fact that we do not make things here any more. It is complete balderdash. I want more manufacturing-especially in the west midlands, obviously-and I want more manufacturing employment in an expanding sector that is helping to take us out of the recession.
	Leaving aside what the Government have done for research and development and so on in the Budget and the pre-Budget report, I can tell the House that in the Budget capital allowances have been increased markedly, which will have a particularly beneficial effect on smaller businesses. We need those capital allowances to encourage the investment that will enable us to drive forward for the future, and the Government were absolutely right to increase them.
	I must, with some sadness, contrast that with the position of the Conservative party. Some of its members may not know this, but the Conservative party has a clearly enunciated policy of cutting capital allowances. It seems absolutely potty to me to take billions of pounds away from manufacturing by cutting capital allowances just when there is a consensus in our economy and our society that we need to nurture manufacturing, and that we must enable it to expand so that it can help to pull us out of the recession.
	I am proud that the Government are increasing capital allowances to help manufacturing. I contrast them with a Conservative party which seems to have learnt very little, if anything, about manufacturing, and wants to cut capital allowances. How sad can you get?
	 Ordered, That the debate be now adjourned.-( Kerry McCarthy.)
	 Debate to be resumed tomorrow.